Expert Survey Within the ZEW Financial Market Test – Analysts Expect Positive Reactions From the Stock Market Under a Conservative-Liberal Coalition Government

In the federal elections on September 18th, German citizens will decide who sets the political and economic course in Germany over the coming four years. Financial experts forecast that a coalition government of CDU/CSU and FDP will have the most beneficial effects on the German stock market – on a one-month well as on a two-year horizon.

They trust the conservative-liberal coalition to introduce reforms that will bring Germany’s economy back on track. These are the results of a survey among 283 financial market experts on the effects of the forthcoming elections on the German stock market. The study was conducted by the Centre for European Economic Research (ZEW), Mannheim, within the framework of the ZEW Financial Market Test in August 2005.

According to the experts, a so-called Grand Coalition of Christian democrats (CDU/CSU) and social democrats (SPD) would be far less successful in the short and long term. They apparently assume that both major parties would merely be able to agree on the lowest common denominator and thus fail to take any greater reform steps. However, in the long and short term, the experts consider the Grand Coalition to be a better option for the German stock market than the current government formed by SPD and Green Party, which would depend on cooperating with the FDP to gain a majority. This negative assessment appears rather surprising since the incumbent government introduced a number of promising reform proposals. The financial experts agree on referring to the possible coalition of SPD, Green Party and Left-wing Party as long-term and short-term worst-case scenario for the German stock market.

For further Information please contact

Volker Kleff, E-mail: kleff@zew.de